GST On Online Gaming: GoM Yet To Reach Consensus On 28 Percent Tax On Gross Revenue

The GoM is said to take another couple of weeks to finalise its report.

At present, online gaming is clubbed together with casino and horse racing in India.

Source : Soumil Kumar/Pexels

The Group of Ministers (GoM) — led by Meghalaya Chief Minister Conrad Sangma and reconstituted to examine the taxation of casinos, horse racing — and online gaming in India, was expected to submit its final report on August 10. However, as per a report by Business Standard, the panel is yet to reach a consensus on imposing a Goods and Services Tax (GST) of 28 percent on gross gaming revenue (GGR). The GoM is said to take another couple of weeks to finalise its report. Following the panel report, the GST Council is expected to meet in September to take a decision.

In its last meeting, the GoM discussed various methods of taxation of casinos, horse racing, and online gaming. The panel felt that further deliberations were required on the matter and fixed August 10 as the date for finalising its report. It was decided to impose the tax on the GGR and not on the net amount excluding prize money. For those unaware, GGR represents the total amount collected by online gaming firms before distributing the winning amount to the victors. 

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At present, online gaming is clubbed together with casino and horse racing in India, and hence faces a GST of 18 percent. This is imposed on the service fee a company charges for its online gaming services, and not on the winning amount.

“In the last meeting, the GoM deliberated on 28 percent GST on the entire face value or bet amount in online gaming. However, there are some contentious issues with respect to tax treatment, particularly in case of casinos, and will require further deliberation,” a panel member told Business Standard. The report added that as per sources, the panel is also examining whether to have different approaches as online gaming and casinos don’t really follow the same fundamentals.

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Earlier this month, the GoM met industry bodies and leading operators to discuss the valuation approach for GST on online gaming and attempted to understand how online skill gaming is different from betting and gambling.

The GoM heard the legal distinction between online ‘games of skill' and ‘games of chance'. Leading industry representatives of the online gaming industry and tax advisory firms shared multiple Supreme Court and High Court rulings, which have affirmed a clear legal distinction between games of chance, which fall under betting and gambling, and games of skill which do not.

As per rulings of multiple Courts, ‘games of skill' are legitimate business activities protected under Article 19(1)(g) of the Indian Constitution since they do not fall under the purview of ‘gambling'. These precedents have repeatedly emphasized that games of chance constitute gambling activity while games of skill do not.

(With inputs from IANS)